Specialty Firms Shoot Down Big Money Bids

Two specialty firms drew a line in the sand this week after announcing that offers from larger pharma firms weren’t up to snuff for their shareholders.

CV Therapeutics and Genentech both rebuffed bids from Astellas Pharma and Roche, respectively.

The Genentech/Roche negotiations have dragged on for months. In July 2008, the Big Pharma firm offered $89 a share for the remaining stock Roche didn’t already own. Genentech’s board of directors rejected the offer citing that it undervalued the company’s pipeline. Roche rebutted with a hostile $86.50 a share ($42 billion) offer directly to stockholders.

On Monday, a committee created to advise Genentech’s minority shareholders unanimously recommended that the offer be denied.

“Over the past seven months, the special committee persistently attempted to work constructively with Roche and we were consistent in our stated willingness to negotiate toward a price that recognizes the full value of Genentech,” stated special committee Chairman Charles Sanders in a letter to shareholders. “We are disappointed that Roche has chosen not to consider an appropriate price range for Genentech's minority shares or to constructively negotiate with our committee, and we must recommend that stockholders not tender their shares as a result.”

Investors seem to agree, noting—almost universally—that both bids seemed way too low for a company that brought in $3.4 billion in income last year.

“The Roche model is unduly conservative, while Genentech's is a mixture of realistic and aggressive, but overall we believe it supports a $100-plus deal price,” stated JP Morgan analyst Geoffrey Meacham in a letter. “We believe Roche is committed to the acquisition and hence will ultimately have to increase its bid.”

Sanders made it clear that its worldwide commercialization agreement with Roche is set to expire in 2015, and while it would like to extend the contract, it doesn’t necessarily have to be with Roche.
Undervalued = Unacceptable
Meanwhile, CV Therapeutics made it clear to Astellas that it has not changed its mind about turning down a $1 billion offer to turn the company over to the Japanese drug firm. Astellas made the $16 a share offer privately in November 2008, which was promptly rejected. CVT reassessed the offer after a spike in shares, but once again turned it down last Friday.

CV Therapeutics CEO Louis Lange stated that the company has a strategic plan in place that “enhances” the value of the company.

“The full promotional launch of the improved US Ranexa labeling is just beginning, the introduction of Ranexa in Europe is imminent, and Lexiscan is showing real growth in the marketplace,” Lange said in a letter.